School budget season in full swing

If recent headlines are any indication of what to expect – this year’s budget season will prove to be especially challenging for most school districts alike.

• Tax hike likely in Allentown School District
• Catasauqua Area board OKs early budget
• Salisbury may raise school tax
• Tax hike likely in Saucon Valley School District
• Bethlehem Area School District residents see 10% tax increase in preliminary budget
• Easton Area budget calls for a 12% tax hike
• Suggested Cuts
• Quakertown schools look to trim $10 million
• Souderton Area faces budget gap
• Bangor School District asks teachers to lower pay increases

In the face of continued declines in earned income tax and real estate property taxes – which account for an average of 60-70% of their total revenue sources – many schools will be facing some very tough choices in their 2010-2011 budgets – and beyond.

Significant increases in the expense areas of health care, pension contributions (PSERS), electric deregulation, special education, cyber/charter schools reimbursements and other benefits will also play an important part of those discussions.

Overview of school budget timelines

The Pennsylvania Department of Education (PDE) published a nice summary of school budget timelines and process under the mandated preliminary budget cycle requirements of Act 1.

What is the adjusted index (ECI/SAWW)?

The ECI/SAWW index is calculated by averaging the percent increases in the Pennsylvania statewide average weekly wage and the Federal employment cost index for elementary/secondary schools. Additionally, for school districts with a market value/personal income aid ratio (MV/PI AR) greater than 0.4000, the value of their index is adjusted upward by multiplying the base index by the sum of 0.75 and their MV/PI AR.

Its also important to remember the ECI/SAWW index is a “lagging” economic indicator. Act 1 directs PDE to annually calculate the Index by August 15th and to annually publish the Index in the PA Bulletin by September 1st. The SAWW for calendar year 2008 and the ECI for FY 2008-09 will be used to calculate the Index certified by the PA Department of Education in September 2009. The resulting Index will be used for property taxes for FY 2010-11.

What does this mean for our district?

The base ECI/SAWW index for 2010/2011 is 2.9% and our MV/PI AR is 0.4177. This calculation provides an adjusted index for Northwestern Lehigh School District of 3.4%.

Calculation: 2.9% x (0.75 + 0.4177) = 3.4%.

Act 1 also provides districts with ability to exceed this index by seeking and being granted “exceptions”. Additional information on these 10 exceptions is provided on PDE’s website.